Financial Accounting solve this problem Utilizing the band of investment technique, an appraiser has a loan-to-value ratioof 75%, a 20-year fixed mortgage with a fixed annual rate of 6.75% requiringmonthly payments.If the overall capitalization rate is 9.5%, what is the equity dividend rate if themortgage interest rate was increased to 8.5%?a) 8.5%b) 10.64%c) 6.76%d) 3.57%

Step 1: Define Band of InvestmentThe band of investment method is a similar concept to the weighted…

Answered: Utilizing the band of investment…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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You have been assigned to estimate the interest rates that your company may have to pay when borrowing money in the near future. The following information is available.kPR = 2%MR = 0.1% for a 1 year loan increasing by 0.1% for each additional yearLR = 0.05% for a 1 year loan increasing by 0.05% for each additional yearDR = 0 for a 1 year loan, 0.2% for a 2-year loan, increasing 0.1% for each additional yearExpected Inflation Rates Year 1 = 7% Year 2 = 5% Year 3 and thereafter = 3% a. Calculate the inflation adjustment (INFL) for a 5-year loan. b. Calculate the appropriate interest rate for a 5-year loan.
Find the amount of interest and the maturity value of the following loan. Use the formula MV =P+I to find the maturity value. Round your answers to the nearest cent. Principal Rate (%) Time Interest Maturity Value $100,000 7 4 months
Debt Service Coverage Ratio (DSCR or DCR): Assume that a property has a monthly net operating income (NOI) of $25,000, and that a lender has a minimum DSCR requirement of 1.35. What is the maximum loan that you could obtain assuming a 4.5% interest rate and a 30-year term with monthly payments?
1. You have just obtained a commercial mortgage for $6.25M with a 5-year term, 25-year amortization period and 6.50% mortgage interest rate. (a) Construct an amortization table for the term of the loan assuming annual payments. What is the annual payment? What is the balance at maturity? (b) What is the e¤ective cost of borrowing if the borrower pays an origination fee of $30,000? (c) The borrower can repay the balance of the loan at any time prior to its maturity, but must pay a penalty of 5% of the outstanding balance. What is the cost of borrowing if the borrower pays an origination fee of $30,000 and pays off the remaining balance of the loan after making payments for 4 years?
Given the following information about a fully amortized loan, calculate the lender’s yield (rounded to the nearest tenth of a percent) if the loan were to be paid off in 4 years. Loan amount: $568,000 Term: 30 years Interest rate: 8.23 % Monthly Payment: $4,259 Discount points: 1.5 3rd Party Costs: $7,500 8.60% 7.80% 8.70% 8.50%
DCR: a. Calculate the DCR for an income producing property to be acquired at a price of $7M and a CAP of 5.5%. The down payment on the property is 30% of the property value and the mortgage on the remaining balance is a fixed-rate interest only loan at a rate of 4%. b. What is the meaning of a DCR of 1.40, for example? Please explain. c. List and briefly explain three different factors that are likely to cause the lender to require a higher DCR from investors?
Your property has net operating income of 4,500,000. Assuming you value the property with a cap rate of 6.5%, what is the DSC ratio if the lender will lend up to 75% of value and the rate is 4.5% based on a monthly pay, 30 years, fully amortizing loan? Group of answer choices 1.43 1.35 1.51 1.27
Consider a traditional 30-year fixed rate mortgage, borrowing $400,000 (present value) at an annual interest rate of 3.25%, payable in monthly payments. Create an Excel spreadsheet and use basic math functions to develop a schedule for the entire life of the loan. Your table should include columns for Payment #, Principle Remaining, Interest Paid, Principal Paid, Cumulative Interest Paid, and Cumulative Principal Paid. Then use this table to answer the following questions: c. How much did the borrower pay in total to pay off this loan, if they paid just the minimum payment for the entire 30 years? And how much of that total is just interest? d. Create a graph of the interest and principal amounts paid each month, for just the first two years of the loan. (Hint: use an “X Y Scatter” chart type) e. Bonus question: How much sooner (in months) would the borrower pay off this loan, if they paid an extra $100 per month? Your Excel spreadsheet must show this calculation
show steps to calculation with screenshots of excel !! Consider a $ 5,000,000, 8.5% APR, 30-year mortgage with monthly payments. What is the yield to maturity (YTM) of this loan under the following circumstances: (a) No points, fully - amortizing (b) Three points, fully amortizing. Three points means that the present value is 3% lower than the loan amount in the YTM calculation. ( c) Three points, 7 - year maturity with balloon.
You purchase a building that generates a stabilized NOI of $900,000 and has a capitalization rate of 8%. It has been financed with a mortgage loan of $6,750,000 with a 5-year term, a 25-year amortization and an interest rate of 6%. a) Calculate the Loan to Value (LTV) b) Calculate the Debt Service Coverage (DSCR). c) Calculate the loan balance at the end of one year. d) If you sell the building at the end of the year for $12,000,000 what is your Return on Equity (ROE)?
Considering the following information, what is the NPV if the borrower refinances the loan? Expected holding period: 3 years; current loan balance: $400,000; current loan interest: 5.875%; remaining term on current mortgage: 15 years; new loan interest: 3.625%; new loan term: 15 years; cost of refinancing: $6,000. Assume that the opportunity cost is 10%. Should the borrower refinance
Consider a $150,000 loan with an annual interest rate of 6.5 percent and a 30-year term. Discount points are equal to 2 percent. All other up-front financing costs to be paid by the borrower total $3,000. Compute the monthly payment and the loan balance at the end of months 1–6. What is the effective borrowing cost (EBC), assuming that the loan remains outstanding to maturity?

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